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NBS Report: Web of Alternative Forex Blocks Economic Recovery- Otunuga

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Lukman Otunuga, an economic expert with penchant in the currency market, has rued that Nigeria’s web of alternative foreign exchanges remains a major stumbling block to a sustainable economic recovery while also effectively repelling FDI.

Otunuga, a research analyst at FXTM was reacting to a detailed data released from the National Bureau of Statistics, in the fourth quarter of 2016, showing the nation’s Gross Domestic Product (GDP) contracted by -1.30 per cent (year-on-year) in real terms, from N18,533.75 billion in Q4 2015 to N18,292.95 billion in Q4 2016.

He aligned with the school of thought that the Gross Domestic Product (GDP) of the Nigerian economy has continued to dwindle due to factors ranging from weaker inflation, induced consumption demand, an increase in pipeline vandalism, significant reduced foreign reserves and a concomitantly weaker currency and problems in the energy sector such as fuel shortages and lower electricity generation.

According to Otunuga, “Nigeria’s full-year economic contraction of -1.5% for 2016 continues to highlight how the terrible combination of depressed oil prices, foreign exchange shortages and overall sluggish economic fundamentals have exposed the nation to downside shocks”.

Meanwhile, the NBS report shows the decline was less severe than the decline recorded in the previous quarter, of -2.24 per cent, but was nevertheless lower than the growth rate recorded in the final quarter of 2015, of 2.11 per cent.

Quarter-on-quarter, real GDP increased by 4.09 per cent, which partly reflects seasonal factors as well as a rise in the general price level.

For the full year 2016, the GDP contracted by -1.51%, indicating real GDP of N67,984.20 billion for the year. Nominal GDP was N29,292,998.54 million at basic prices in the fourth quarter of 2016, which represents year on year nominal growth of 12.97 per cent.

In contrast to real growth, this is 5.84 per cent points higher than the rate recorded in the same quarter of 2015, implying that the GDP deflator increased faster than the earlier period. For full year 2016, aggregate nominal GDP stood at N101,598,482.13 compared to N94,144,960.45.

During the period under review, oil sector contributed 8.07 per cent to the growth of the GDP with an estimated production of 1.90million barrels per day.

However, for the full year, oil production was estimated to be 1.833million barrels per day, compared to 2.13million barrels per day in 2015.

The reduction was largely due to vandalism in the Niger Delta region and as a result, the sector contracted by -13.65 per cent, a more significant decline than that in 2015 of -5.45 per cent which reduced the oil sectors share of real GDP to 8.42 per cent  in 2016, compared to 9.61 per cent in 2015.

The non-oil sector contributed its share of GDP to 92.85 per cent from 91.94 per cent in the fourth quarter of 2015.

Commenting on the report, Otunuga said, “Nigeria’s full-year economic contraction of -1.5% for 2016 continues to highlight how the terrible combination of depressed oil prices, foreign exchange shortages and overall sluggish economic fundamentals have exposed the nation to downside shocks. While the outlook for Nigeria still remains bearish in the short term, it must be kept in mind that markets have acknowledged that the nation is currently in the process of a critical structural transformation”.

He however, added that since the start of the year, the positive report of a successful Eurobond issue coupled with recent interventions from the CBN has bolstered investor risk sentiment towards the nation.

“It should be understood that Nigeria’s web of alternative foreign exchanges remains a major stumbling block to a sustainable economic recovery while also effectively repelling FDI. While recent reports of the CBN releasing an additional $180 million to the forex markets in an effort to ease business transactions may strengthen the Naira further, speculations are rife over the central bank devaluing the local currency to improve liquidity and regain more stability”.

 

 

 


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E-Financial

Nigerian Manufacturing Sector Contracts for 5th Consecutive Month – CBN

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The Manufacturing Purchasing Managers’ Index (PMI) in September stood at 46.9 index points, indicating a contraction in the Nigerian manufacturing sector for the fifth month.

This was disclosed by the Central Bank of Nigeria (CBN) in its September PMI report released last week.

According to the report, four out of the 14 sub-sectors surveyed reported expansion (above the 50 per cent threshold) in September.

It listed the expansion order as electrical equipment; transportation equipment; cement and nonmetallic mineral products.

It said the remaining sub-sectors reported contractions in the following order: petroleum & coal products; primary metal; furniture & related products; printing & related support activities; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; fabricated metal products and plastics & rubber products; while the paper product sub-sector was stable.

Production

At 47.3 points, the production level index for the manufacturing sector indicated contraction in September for the fifth consecutive month.

Of the 14 sub-sectors surveyed, five recorded increased production level, one reported same level of production, while eight recorded declines in production.

New Orders

At 46.4 points, the new orders index also contracted in September for the fifth consecutive month. Six sub-sectors reported expansion in new orders, while the remaining eight recorded contraction in the month.

Supplier Delivery Time

The manufacturing supplier delivery time index stood at 53.5 points in the month, indicating a faster supplier delivery time for the fifth time.

Six of the 14 sub-sectors recorded improved suppliers’ delivery time, five reported same level, while three recorded slower delivery time

Employment Level

The employment level index stood at 44.1 points, indicating contraction in employment level for the sixth consecutive month.

Of the 14 sub-sectors, two recorded growth in employment, three recorded same level of employment, while the remaining nine recorded lower employment level in the review month.

Raw material Inventories

The manufacturing sector inventories index also contracted for the sixth consecutive time in September to 43.0 points. Four of the 14 sub-sectors recorded growth in inventories, while the remaining 10 recorded lower raw material inventories.


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FG Sacked IST Members over Fraud- Ahmed

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Mrs Zainab Ahmed, minister of Finance Budget and National Planning, has said the Federal Government sacked some past members of the Investments and Securities Tribunal (IST) as they indulged in corruption.

FG Sacked IST Members over Fraud- Ahmed

Inaugurating the new members, the minister charged the new members to eschew corruption and be forthright.

Bar. Azi Amos Isaac was appointed as Chairman for a five year term and Bar. Nosa Smart Osemwengie, was re-appointed as member for a second term of four years.

“The problem with the tribunal has been infighting amongst members, lack of industrial harmony and series of complaints bordering on maladministration.

“This has been the bane of the tribunal and a source of embarrassment not only for the Ministry of Finance but for the government in general,” Ahmed said.

The new chairman, Azi, assured the finance minister that, “the teething issue of restiveness has been addressed since he assumed duty,” adding that, “The place is calm and the staff have become very supportive.”

Azi said since 2003, the tribunal has “given judgment in the value of assets worth over N844 billion and that from 2017 to date, they have given decisions in monetary value totalling over N28bn.

“It has not failed in its adjudicatory responsibility.

“It has carried out its assignment with candour and integrity and intends to improve on what has been on ground.”

 


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CBN Bans Customer-to-Customer Forex Transfer

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Central Bank of Nigeria (CBN) has banned transfer of foreign exchange (forex) from one customer to another.

CBN Bans Customer-to-Customer Forex Transfer

According to the apex bank, forex cash lodgements into domiciliary accounts can only be done by the account owners henceforth.

An internal memo available in the media space explains that the new guidelines are necessary to review the utilisation of inflows into customers domiciliary accounts.

The circular states: “Forex inflows cannot be credited to customers until the legitimacy of funds is established.

“They can have unfettered access by telegraphic transfers up to a limit of $40,000 monthly for payment of medical bills, school fees, subscription to professional bodies subject to existing CBN guidelines.

“Transfers from one customer to another is prohibited. Transfer within related companies is allowed subject to a limit of $50,000 per month.”

It recommended that proceeds from non-oil exports should be sold to banks, used for repayment of dollar term loans, and self-utilisation for trade transactions for LC, bills and Form A.

Also oil export proceeds from E&P companies are to be used to pay contractors and service providers employed by the oil companies in addition to the recommended uses for non-oil FX proceeds.

Offshore forex inflows from other Nigerian banks and internal account to forex transfers sourced from offshore inflows are to be used for trade transactions subject to eligibility for E-Form M.

“Upon confirmation of the legitimacy of the inflows, customers can have unfettered access, subject to a maximum of $50,000,” the document read.

“Utilisation for trade transactions subject to processing of eligible trade transactions using E-Form M. Payment for services must be backed with demand note from offshore beneficiary and other regulatory documents.

“Related party transfers are allowed to the maximum of the inflow received. The transfer request should be backed by a signed instruction from the account holder.” Payment of government fees and levies are also allowed to the maritime, oil and gas, aviation. government parastatals and export processing zones.

 


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